William Blair Waiting For Better Risk/Reward In SiteOne

Shares of SiteOne Landscape Supply Inc SITE continued higher Tuesday, a day after sell-side analysts initiated a flood of new coverage as the IPO quiet period expired for underwriters.

William Blair's Ryan Merkel was one of two sell-side analysts to initiate coverage on SiteOne on Tuesday. Merkel assigned a Market Perform rating on the stock.

"... we view shares as reasonably valued at current levels and prefer to wait for a better risk/reward profile," Merkel said.

Amid the valuation comment, the William Blair analyst highlighted three positive points for SiteOne and its investors.

• "Leading consolidator in highly fragmented market.
• Company-specific initiatives and end-market tailwinds will drive organic growth.
• Experienced management team."

Merkel pointed to several key risks, including "cyclical new construction (37% of sales) and repair and upgrade
(18%) demand trends" and "an aggressive acquisition strategy [which] creates the chance of operational slip-ups, errors in capital allocation, or falling short of communicated financial targets."